Question 1

If consumption is greater than income, saving must be negative.

Accepted Answer

A) True 
 B)False

Question 2

An increase in the interest rate, other things constant, decreases the amount of investment spending.

Accepted Answer

A) True 
 B)False

Question 3

Net exports

Accepted Answer

A) increase as real domestic income increases 
B) decrease as real domestic income increases 
C) are independent of real domestic income 
D) are always positive 
E) are always negative 
A) increase as real domestic income increases 
B) decrease as real domestic income increases 
C) are independent of real domestic income 
D) are always positive 
E) are always negative

Question 4

If every time disposable income increases by $5 billion, consumption increases by $4 billion and saving increases by $1 billion, the MPC and MPS are, respectively,

Accepted Answer

A) 1/4, 1/2 
B) 1/2, 1/2 
C) 1, 0 
D) 4/5, 1/5 
E) the answer is indeterminate from the information given 
A) 1/4, 1/2 
B) 1/2, 1/2 
C) 1, 0 
D) 4/5, 1/5 
E) the answer is indeterminate from the information given

Question 5

The amount of U.S. exports purchased by the rest of the world is primarily determined by

Accepted Answer

A) real disposable income in the United States 
B) real disposable income in other nations 
C) the real interest rate in other nations 
D) the real interest rate in the United States 
E) the government budget deficits in other nations 
A) real disposable income in the United States 
B) real disposable income in other nations 
C) the real interest rate in other nations 
D) the real interest rate in the United States 
E) the government budget deficits in other nations

Question 6

Mr. Green is considering four possible investment opportunities, each of which would cost him $5,000. He expects annual returns on these investments of $600, $500, $400, and $300. If the interest rate is 7 percent, how many of these opportunities should Mr. Green undertake?

Accepted Answer

A) one 
B) two 
C) three 
D) four 
E) none 
A) one 
B) two 
C) three 
D) four 
E) none

Question 7

The non-income determinants of consumption include all of the following except one. Which is the exception?

Accepted Answer

A) net wealth 
B) the profitability of new investment 
C) the price level 
D) expectations 
E) the interest rate 
A) net wealth 
B) the profitability of new investment 
C) the price level 
D) expectations 
E) the interest rate

Question 8

Suppose that autonomous investment level is $100 billion per year. If income in the economy falls,

Accepted Answer

A) the level of investment will increase 
B) the level of investment will decrease 
C) the quantity of investment demanded will increase 
D) the quantity of investment demanded will decrease 
E) investment spending will not change 
A) the level of investment will increase 
B) the level of investment will decrease 
C) the quantity of investment demanded will increase 
D) the quantity of investment demanded will decrease 
E) investment spending will not change

Question 9

An upward shift of the consumption function might be caused by

Accepted Answer

A) an increase in disposable income 
B) a decrease in disposable income 
C) a decrease in the price level 
D) a decrease in household wealth 
E) an increase in the interest rate 
A) an increase in disposable income 
B) a decrease in disposable income 
C) a decrease in the price level 
D) a decrease in household wealth 
E) an increase in the interest rate

Question 10

The marginal propensity to consume is the fraction of a change in income that is saved.

Accepted Answer

A) True 
 B)False

Question 11

Imagine an investment demand curve that shows that, if the market interest rate is 4 percent, the quantity of investment demanded is $500 billion. Then, if the market rate rises to 5 percent, the most likely result is that the quantity of investment demanded

Accepted Answer

A) does not change 
B) rises 
C) declines 
D) rises then falls 
E) It is not possible to answer without seeing the actual curve 
A) does not change 
B) rises 
C) declines 
D) rises then falls 
E) It is not possible to answer without seeing the actual curve

Question 12

Which of the following would shift the consumption function downward?

Accepted Answer

A) a decrease in stock prices 
B) a lower interest rate 
C) a lower price level 
D) lower disposable income 
E) expectations of higher future prices 
A) a decrease in stock prices 
B) a lower interest rate 
C) a lower price level 
D) lower disposable income 
E) expectations of higher future prices

Question 13

Which of the following is not an example of a government purchase?

Accepted Answer

A) schools and teacher salaries 
B) Chinese toys to be sold in discount department stores 
C) aircraft carriers 
D) interstate highway construction 
E) All the answers are correct 
A) schools and teacher salaries 
B) Chinese toys to be sold in discount department stores 
C) aircraft carriers 
D) interstate highway construction 
E) All the answers are correct

Question 14

Exports minus imports equal net exports.

Accepted Answer

A) True 
 B)False

Question 15

If income increases by $100 and $75 of the increase is spent (consumed), the MPS equals

Accepted Answer

A) 1/4 
B) 1/2 
C) 3/4 
D) 4/5 
E) 1 
A) 1/4 
B) 1/2 
C) 3/4 
D) 4/5 
E) 1

Question 16

Exhibit 9-3
  
-In Exhibit 9-3, when real disposable income is equal to $6 billion, saving is equal to

Accepted Answer

A) 0 
B) $1 billion 
C) $2 billion 
D) $3 billion 
E) $4 billion 
A) 0 
B) $1 billion 
C) $2 billion 
D) $3 billion 
E) $4 billion

Question 17

A decline in the interest rate, other things constant, shifts the investment function downward.

Accepted Answer

A) True 
 B)False

Question 18

Expectations that disposable income will increase in the future will

Accepted Answer

A) shift the current consumption function up 
B) shift the current consumption function down 
C) result in a movement upward along the current consumption function 
D) make the current consumption function flatter 
E) make the current consumption function steeper 
A) shift the current consumption function up 
B) shift the current consumption function down 
C) result in a movement upward along the current consumption function 
D) make the current consumption function flatter 
E) make the current consumption function steeper

Question 19

Exhibit 9-3
  
-In Exhibit 9-3, the MPS is equal to

Accepted Answer

A) 0.25 
B) 0.33 
C) 0.67 
D) 0.75 
E) 1.33 
A) 0.25 
B) 0.33 
C) 0.67 
D) 0.75 
E) 1.33

Question 20

Suppose that when disposable income rises from $3 trillion to $3.2 trillion, consumption rises from $2.5 trillion to $2.6 trillion. What is the marginal propensity to consume?

Accepted Answer

A) 0.1 
B) 0.2 
C) 0.5 
D) 0.8 
E) 0.9 
A) 0.1 
B) 0.2 
C) 0.5 
D) 0.8 
E) 0.9

Exam 10: Aaggregate Expenditure and Agregate Demand

If consumption is greater than income, saving must be negative.

An increase in the interest rate, other things constant, decreases the amount of investment spending.

Net exports

If every time disposable income increases by $5 billion, consumption increases by $4 billion and saving increases by $1 billion, the MPC and MPS are, respectively,

The amount of U.S. exports purchased by the rest of the world is primarily determined by

Mr. Green is considering four possible investment opportunities, each of which would cost him $5,000. He expects annual returns on these investments of $600, $500, $400, and $300. If the interest rate is 7 percent, how many of these opportunities should Mr. Green undertake?

The non-income determinants of consumption include all of the following except one. Which is the exception?

Suppose that autonomous investment level is $100 billion per year. If income in the economy falls,

An upward shift of the consumption function might be caused by

The marginal propensity to consume is the fraction of a change in income that is saved.

Imagine an investment demand curve that shows that, if the market interest rate is 4 percent, the quantity of investment demanded is $500 billion. Then, if the market rate rises to 5 percent, the most likely result is that the quantity of investment demanded

Which of the following would shift the consumption function downward?

Which of the following is not an example of a government purchase?

Exports minus imports equal net exports.

If income increases by $100 and $75 of the increase is spent (consumed), the MPS equals

Exhibit 9-3 -In Exhibit 9-3, when real disposable income is equal to $6 billion, saving is equal to

A decline in the interest rate, other things constant, shifts the investment function downward.

Expectations that disposable income will increase in the future will

Exhibit 9-3 -In Exhibit 9-3, the MPS is equal to

Suppose that when disposable income rises from $3 trillion to $3.2 trillion, consumption rises from $2.5 trillion to $2.6 trillion. What is the marginal propensity to consume?

The Art and Science of Economic Analysis

Understanding Graphs-Appendix

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Introduction to Macroeconomics

Tracking the Us Economy

Unemployment and Inflation

Productivity and Growth

Aggregate Expenditure and Aggregate Demand

Aggregate Supply

Fiscal Policy

Federal Budgets and Public Policy

Money and the Financial System

Banking and the Money Supply

Monetary Theory and Policy

Macro Policy Debate: Active or Passive

International Trade

International Finance

Economic Development

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